Foreign Exchange Trading Mini Account Trading: Why Is It Important For Newbie Foreign Exchange Traders
Forex mini trading accounts are best for just about anyone who is getting engaged in foreign exchange trading. You would have to be very rich or very optimistic to begin with a standard account if you are a retail trader (i.e. individual trading on their own account from home). A mini account lets you get engaged without risking big amounts of money and this makes it a very enticing option for most people.
Mini foreign exchange trading accounts usually allow you to trade with just one tenth of the normal lot size. This typically means 10,000 units of currency instead of 100,000.
Of course you do not need to have this much in your account. Foreign exchange trading works with leverage. If you are applying 100 times leverage then you need $100 to control $10,000 in your mini account or $1,000 to control $100,000 for a standard account.
$100 or 100 units of other currency per trade is enough for most traders to commit to a trade when they are starting out and that is why the mini trading account is so popular.
The pip size is also usually smaller in a mini account. Pips are units in which you will measure your profits, losses and costs (the spread). Their dollar value can change depending on the currency cross that you are trading, the lot size and other requirements of your broker, but typical standard pip size is $10 and mini pip size is $1.
Many brokers are now quoting prices to 5 digits behind decimal point which actually would make one pip 0.00001 of the quoted price, but we will continue to use the standard 4 decimal place pip for this example.
So if you have a standard foreign exchange account you can put up $1,000 on every trade, be involved in trading lots of $100,000 and calculate your profits in $10 units.
If you have currency trading account you can expect to commit $100 or its multiple on each trade, be involved in trading lots of $10,000 and calculate your profits in $1 units.
Certainly you can set stop losses so that you do not have to risk all of the capital that is committed to the trade. But your losses will be calculated in terms of pips so these too will be 10 times greater in the standard account.
If you are profitable and your account balance grows, you may want to move up to trading greater sums. You may still do this in your mini account by trading more than one lot at a time. So if you wish to trade a standard lot size you would just trade 10 mini lots. This has the advantage of still ensuring you the ability for fine tuning of your risk because your pip size is still just $1.
The standard account had been the only one that was available before so many people had powerful home computers and high speed internet connections that made it viable for the common person to trade online. The forex mini account is an achievement that has opened up the market to individuals who have the technology but not the capital for standard forex trading investment. Even if you are beginner trader, using reliable forex signals you can rake up significant capital within a relatively short time. Accurate forex signals should be an integral element of every individual traders' forex trading strategy.
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